DOJ Says Sales From Canadian Warehouse to US Customers Are for Export, Despite US Sales Force

Sales of goods warehoused in Canada to U.S. customers were not “domestic sales,” but sales “for exportation to the U.S. that should be appraised using transaction value, the Department of Justice said in a brief filed Nov. 19 at the Court of International Trade (Midwest-CBK, LLC v. U.S., CIT # 17-00154). The brief comes in reply to a filing from Midwest-CBK that argued CBP improperly valued the relevant entries because they were “domestic sales,” ordered by U.S. customers from Midwest-CBK’s U.S. sales force, and title transferred after delivery FOB in Buffalo (see 2111080068). DOJ said “domestic sales” is not a term found in the customs laws, and the sale meets all the requirements for a good sold for U.S. export.

“‘Domestic sale’ is not a statutory term, and the Court need not consider whether a domestic sale exists here,” DOJ said. “The only relevant consideration is whether the statutory requirements for transaction value can be met -- i.e., whether the bona fide sale from Midwest to its U.S. customer is one ‘for exportation to the United States.’”

“When customers in the United States placed their purchase orders, Midwest intended for the goods to be exported from Canada to the United States in fulfillment of those orders,” DOJ said. The orders were processed by the company’s Canadian offices, and the merchandise was “picked, packed and labeled” for delivery to the individual customer in Midwest-CBK’s Canadian warehouse, it said. “Boxes, which were individually labeled for U.S. customers in Canada, were then placed on a truck in Canada and entered into the United States (at the Port of Buffalo) as the first step in Midwest’s process of delivering the orders placed by its U.S. customers,” DOJ said.

The location of Midwest-CBK’s sales force in the U.S., as well as that the U.S. customers were unaware of the importation of the merchandise, “is not relevant to the analysis,” DOJ said.

And the courts have ruled that neither an “international sale” nor a “sale abroad” is required for a sale to be for exportation to the U.S., DOJ said. The Federal Circuit ruled in a 1998 case involving La Perla Fashions that sales from a U.S. company to a U.S. customer met the requirements for sales for exportation to the U.S., DOJ said.